Fed’s Bowman says there’s ‘a lot more work to do’ to bring down inflation

Federal Reserve Bank Governor Michelle Bowman delivers her first public remarks as a federal policymaker at an American Bankers Association conference in San Diego, California, on February 11, 2019.

Ann Sapphire Reuters newspaper

Federal Reserve Governor Michelle Bowman said Tuesday she expects more interest rate hikes, with higher rates prevailing for a while until inflation subsides.

The central bank official said in remarks prepared for a speech in Florida, “I am committed to taking further action to bring inflation back to our target. “In recent months, we have seen a decline in some measures of inflation. but we have a lot more work to do, so I hope [Federal Open Market Committee] will continue to raise interest rates to strengthen monetary policy.”

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The FOMC has raised the Fed’s benchmark lending rate seven times since March 2022, for a total of 4.25 percentage points.

Last week, the minutes of the committee’s December meeting indicated that most members were on board with additional increases in 2023, likely to take the food rate slightly above 5%.

Reflecting the consensus of this meeting, Bowman said that he sees high rates maintained until there are “persuasive signs that inflation has peaked and for more consistent indications that inflation is on a downward path” before easing up on monetary policy restrictions.

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“I hope that once we achieve a sufficiently restrictive federal funds rate, it will need to remain at this level for some time in order to restore price stability, which will in turn help create conditions that support a strong sustainable labor market,” it. said.

He added that policies will be guided by upcoming economic data for indications of how Fed policy will affect growth.

Bowman spoke the same day as Fed Chairman Jerome Powell addressed the Swedish Fed’s counterpart, the Riksbank. In this speech, Powell emphasized the need for the Fed to remain independent from political influence as it implements policies aimed at bringing stable prices.

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Bowman drew on past experience, noting the mistake the Fed made in the 1970s, when it raised rates to address inflation but then lowered them when the economy slowed. He said he understood that Fed policy could slow down the economy and in particular the labor market, but stressed that doing nothing brought greater costs.

“It’s important to keep in mind that there are costs and risks to tightening policy to lower inflation, but I see the costs and risks of allowing inflation to persist more,” Bowman said.

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